Brief：JLL UK has predicted that investment volumes in the UK property market in 2018 will total around ￡55bn, with returns of 6.4%.

JLL UK has predicted that investment volumes in the UK property market in 2018 will total around £55bn, with returns of 6.4%. This is slightly down on the £60bn investment volumes and 10% returns for 2017.

The real estate firm has cited the impact of the removal of the capital gains tax exemption for overseas investors in UK commercial property as a temporary blow to the market but that the new regime will not deter investors in the long term. JLL also predicts that the UK, and London in particular, is likely to be a key destination for Japanese and Korean capital.

Jon Neale, Head of UK Research, JLL, said: “Undoubtedly there will be investors who are dissuaded by the capital gains tax changes, but the change only aligns the UK with most other developed countries. In spite of this, the major reasons for investing in UK property remain – liquidity, lot sizes, landlord-favourable leases, the strong economic and leasing fundamentals, and at present, relatively high yields and a weak currency.”

“We also expect Korean investors to add weight to the broader push from Asia this year. While they have held back from adding to their UK exposure in the aftermath of the referendum, we expect a return in 2018, attracted by the market’s resilient performance and high pricing in other global markets.”

JLL’s property predictions for 2018 also include the sustained and resilient performance of the industrial and logistics sector and a continuation of the boom in deals for flexible office providers as more corporates take space. While proptech will continue to transform the industry, JLL highlights digital construction as one area that could have more dramatic impacts over the next few years.

Following a number of recent landmark deals, JLL forecasts that 2018 will see wider participation by institutions and pension funds in the alternative sectors. Appetite is being driven by a mix of long income opportunities linked to inflation, exposure to strong demographic trends and a number of sectors which benefit from a structural supply and demand imbalance. There will be a rise of mixed-use alternatives as investors and operators will increasingly regard themselves as providers of living space and social infrastructure. The shortage of supply will result in established operators in one sector moving into a similar or complementary market.